A loonie for your thoughts?

Hey there, time traveller!This article was published 9/2/2012 (1765 days ago), so information in it may no longer be current.

Manitoba NDP MP Pat Martin is going after the penny again.

The Winnipeg Centre reintroduced his bill today to take the one-cent piece out of circulation.

ROYAL CANADIAN MINT

ROYAL CANADIAN MINT

2010 penny - Royal Canadian Mint photo. close cut closecut

"There are over 30 billion pennies in circulation in Canada today, many of which are underneath my bed in an old cookie jar," he said in the House of Commons.

He went on to say if any evidence was needed as proof the penny’s jig is up, "it is the freebie jar at every cash register that says ‘Take one or leave one.’ We do not see jars full of loonies there."

Martin has been on an anti-penny crusade for years. He’s not alone. The Senate, the Royal Canadian Mint, the Department of Finance, and numerous economists have studied the issue and most came to the conclusion the penny has outlived its usefulness.

In December 2010, the Senate Finance Committee issued a report calling on the government to get rid of the penny. After a series of hearings with everyone from Finance bureaucrats to bankers, retailers, charities and consumers, the committee concluded the penny has got to go.

Basically the Senate said, a penny can’t buy your thoughts, nor can it buy anything else on its own. You can’t even legally use more than 25 of them at one time to buy something apparently. (Who knew?)

Retailers hate pennies. Charities, which some feared would balk because they’d lose a way to raise money, were among the chief proponents of getting rid of it. Why? Because it costs a lot of money to count and roll pennies and if people don’t have pennies to drop in a UNICEF box or a Salvation Army Christmas kettle, they will probably drop in nickels or dimes, or gosh, even loonies.

It also costs the Royal Canadian Mint 1.5 cents to make each and every penny. Finance Canada then buys each penny from the Mint for 1.5 cents. But it can only sell them for one cent each so Finance Canada loses money for every penny.

Consumers might be afraid they’d start to pay more without a penny because retailers would round up the prices to the nearest five cents. That might be true. However New Zealand found prices actually went down when it got rid of both its one and two cent coins. New Zealand attributed that to competition in the retail sector.

The downside is it will actually cost money to get rid of the penny in the short term. It will be necessary to launch a pretty major communications plan to let Canadians know the penny is going to be eliminated and information on how to redeem your pennies. Plus while the pennies which come back will be melted down, it will cost the Bank of Canada money to pay people for their pennies, but the Bank will not make back that money when it melts the pennies down. But over time, the Department of Finance will save money because it won’t be paying more to make coins than they are worth.

Both Conservative and Liberal senators on the committee backed the penny’s demise.

The Senate committee had some pretty good recommendations for how to go about it. It suggested production of the penny be stopped as soon as possible and then removed from circulation 12 months later. The federal government, cooperating with the provinces and the retail industry, would need to make clear but voluntary guidelines for how businesses should round prices after tax to the nearest five-cent mark. These would apply only to cash transactions. The Bank of Canada would continue to redeem the penny indefinitely so if you find a jar of pennies under grandma’s bed in 10 years you can still likely redeem them. And charities can help bring in those pennies by launching penny fundraising drives.

The Senate report has pretty much been gathering dust ever since. So today Martin is trying to get the issue on the agenda again.

"This budget should be the penny’s last hurrah."

In the 2010 budget, Finance Minister Jim Flaherty pledged to save money on making money by switching from paper to plastic bank notes. The first of those (the $100 bill) was released last year and the rest will be released over the next year and a half or so.

Finance Minister Jim Flaherty was non-committal today about whether this budget will be the one that puts the penny on the chopping block.

"The Senate National Finance Committee recommended a major change to Canada’s currency system and as such requires extensive review," he said in an emailed statement through his press secretary.

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